Broker tips: Spirax, Nichols, Hikma

(Sharecast News) - RBC Capital Markets hiked its target price on thermal energy and fluid technology manufacturer Spirax from 6,000p to 6,800p on Wednesday following the firm's full-year results. The Canadian bank said Spirax's results had touched on most of its key focus areas - limited growth in steam, recovery potential in ETS in Watson-Marlow, and the need for improved return on invested capital.

Overall, RBC Capital stated that while Spirax reported FY25 profits roughly 2% ahead of expectations, it had also chosen to cut its 2026-28E earnings per share estimates by 3% per year.

"While in part this is currency driven, it also reflects lower ongoing growth assumptions in Steam (with 2026E forecasts at only 2% following the 1% in 2025)," said RBC. "We retain an 'underperform' rating, though do increase our price target to £68 as we moved to a 2026E base year."

Analysts at Berenberg lowered their target price on fruit flavoured cordial producer Nichols from 1,820p to 1,720p on Wednesday after the group reported full-year results that were in line with consensus estimates.

Nichols reported adjusted underlying earnings of £31.7m and adjusted pre-tax profits of £33.6m, up 10% and 7% year-on-year, respectively, and earnings per share growth of 5.5% to 67.5p. Nichols also increased its final dividend by 9% to 18.7p, resulting in a FY25 dividend per share of 33.7p.

Furthermore, Berenberg noted that Nichols announced a change to its dividend policy, as it plans to reduce its dividend cover to 1.5x from 2.0x to reflect the board's confidence in its outlook, the high levels of cash generation and its robust balance sheet.

"Nichols is a high quality, defensive growth option in an uncertain market environment, with the stock generating 20% margins, ROCE of over 30%, high levels of free cash flow and a robust balance sheet, offering a 5.3% dividend yield at just 12.8x price-to-earnings," said Berenberg.

The German bank reiterated its 'buy' rating on the stock.

Stifel has slashed its target price for Hikma Pharmaceuticals by nearly a third but said it still sees significant upside, saying the recent sell-off represents a "good entry point" for new investors.

The broker cut its target price for the shares from 2,400p to 1,700p, though that still implies 40% potential upside from current levels after a 25% slump in the stock since FY25 results were released on 26 February. Stifel said that the market has "lost confidence" which will take time to restore, with the jewel of the group - margin levels in the injectables division - disappointing as of late.

"Having thought the plaster had been ripped off in November 2025 when downgrading the Injectables operating margin from mid-30s to a new 'floor' of 30%, guidance for FY26 at 27-28% understandably spooked the market," Stifel said. "Quite a swing, that has left the market searching for a floor and concerned that margin could erode further, making it harder to deliver profit growth which is needed to make the stock work."

Nevertheless, with the stock back down to 2022 levels, when the former Generics business was struggling - before management stabilised the business and rebased expectations - investors could prosper from buying the dip, Stifel said.

"We [...] accept that investors may want to see some positive proof points, but on balance, we believe the current price and near-three-year low valuation will prove to have been a good entry point."